Today in the Times Geoff Baker continues down a path that he has
marched since last fall. It is an ongoing series on the value of
the Mariner’s franchise primarily. At times during the effort it
has seemed to me as if he has lost sight of stuff and headed out
into the swamp, but he is dogged and mostly picks the trail up
again.
Today he has another post that I will link and copy as well. It
is considered bad form to copy, but it is so important to read this
as it really captures what is going on with the ownership and you
start to understand why the team is and has not been very good for
a long time. Simply, put baseball, winning baseball is not really
their consideration and has not been as long as they’ve been
here.
Pending sale of Padres could drive Mariners franchise value
up beyond $800 million
Posted by Geoff Baker
mariners.jpg
We’re done with another season of interleague play in which
the American League once again throttled the National League in an
annual series of unbalanced-schedule contests that seem to prove
less and less meaningful each year. Unlike previous seasons, the
Mariners were unable to use their schedule against the weaker NL to
pad their overall record, finishing below .500 for the first time
in 13 years.
For me, the only thing interesting to emerge from the Padres
series over the weekend — other than Ichiro finally starting to hit
a bit — was news that two bidders in the pending sale of the San
Diego franchise have put up $800 million offers for the club.
That’s huge news if you happen to be an owner or part-owner of the
Mariners.
You’ll remember that we spent much of the winter filling you
in on the news that, despite continued payroll cuts designed to
keep the M’s books balanced on a yearly basis, the projected value
of the franchise keeps skyrocketing. And the eventual value of the
team is projected to go much higher than the $585 million that
Forbes recently placed on it in the second-highest jump by any MLB
team from its 2011 valuation by that magazine.
Not that this is news to Times readers.
You might remember that, when we covered the Chris Larson
divorce trial last December, two experts in franchise valuations
placed the worth of the Mariners at somewhere between $551 million
and $750 million. The expert hired by Larson himself came in on the
low end, while the one retained by his ex-wife, Julia Calhoun,
offered up the high end figure.
The judge in the case eventually settled on a $641 million
valuation for purposes of the divorce settlement.
But now, events in the real world outside of the courtroom
are on-pace to blow those figures out of the water. And the
Mariners could wind up topping that $800-million figure thrown
around in regards to the Padres.
Photo Credit: AP
One thing that has to be understood throughout any attempt
to place estimates on a team’s value is the increasing demand for
owners to renegotiate new regional sports network (RSN) television
deals. The Mariners can opt out of their deal with ROOT Sports by
2015 and can actually begin new negotiations any day now — if they
haven’t already — because such contracts need to be finalized well
ahead of their actual start dates.
Thus, the Mariners are sitting on a huge financial windfall.
Industry sources have repeatedly suggested to me that the team’s
current deal is already more lucrative than the oft-reported
10-year, $450-million figure that’s been tossed around for years.
Network executives and team officials do their utmost to keep such
figures secret, so there’s no telling how much higher any new deal
will go from what’s already been reported. Three times more? Four
times? We’ll see.
But the one thing you got out of the Larson divorce case —
and which industry experts are pretty consistent about — is that
the Mariners are worth more than the Padres.
Mary Ann Travers of Crowe Horwath LLP, the appraisal expert
hired by Larson, came in with the low-end figure at trial but still
conceeded the Mariners were still worth somewhere between the $480
million the Padres sold for in 2009 and the $593 million fetched by
the Texas Rangers in 2010.
Don Erickson, of Erickson Partners LLC, the franchise
valuation expert hired by Calhoun, argued that the Mariners
compared more favorably to the recent $610-million sale of the
Houston Astros, as well as the $593-million Rangers sale. In other
words, well above the Padres.
And King County Superior Court Judge William Downing agreed
with Erickson, stating in his ruling that: “The Court has reviewed
the details of transactions involving the Houston Astros, Texas
Rangers, San Diego Padres, Chicago Cubs and Atlanta Braves. The
Court would find the May 2011 Astros transaction and the December
2010 Rangers transaction to be the best comparables due to their
recency, similar attendance and other factors. The Seattle
Mariners’ on-field performance probably slides in between the two
but, from a business point of view, they enjoy a superior
demographic.”
So, no one is arguing that the Mariners were worth more than
the Padres.
What’s happened since?
The recently-completed $2.15-billion sale of the Los Angeles
Dodgers, for one. A deal in which the value of the team’s upcoming
TV deal played a huge role. The Dodgers TV rights are up for
renewal after 2013 and the new owners can potentially launch a new
RSN of their own or leverage the value of it to drive their rights
fees sky high.
This is a boom period for baseball franchises and the ones
lucky enough to have TV deals up for renewal are those who will
cash in while the getting is good.
The Padres sale is said to involve roughy a $600-million
pricetag for the team itself, plus an additional $200 million for
an ownership stake in the team’s new $1.2-billion TV deal with
FOX.
Now, again, just because the Padres are getting this sale
price doesn’t automatically mean the Mariners will get
more.
But in theory, as long as the Mariners don’t mess things up,
they should be able to get more in any pending sale if everything
remains equal.
In other words, don’t start racking up yearly deficits and
continue to maintain the best debt load of any team in the majors.
Keep shedding the salaries of pricey veterans like Ichiro this
year, with Milton Bradley and Jack Wilson being dumped last year.
Wait for Chone Figgins to run out next year.
Your attendance might drop in the interim as fans tire of
seasons of 90+ losses.
But as long as the bottom line remains free of red ink — and
remember, the M’s would have turned a profit last year had they not
put in new scoreboards as a Safeco Field upgrade — the M’s look to
be perfectly positioned to reap big money in any sale. Sure, the TV
numbers are not as big as they could be if the M’s were to say,
contend for something. But it’s not as if the Padres are doing
anything big on the field, either. And their revenues are not very
strong at the moment.
All things being equal, from what the experts have already
said, the Mariners should be worth more than the Padres. And right
now, the Padres are said to be worth $800 million.
That’s a hefty increase — in terms of sports franchise
growth — from the initial $100 million purchase price Hiroshi
Yamauchi, Chris Larson and company, first paid for the Mariners
back in 1992. Even when you factor in the additional $112 million
that Larson testified the owners have had to shell out in addition
to their initial costs.
Remember, this isn’t a mutual fund. It’s owning a sports
team and all the tax breaks and prestige that comes with it. So, we
don’t calculate return on investment as we would a mutual fund over
20 years — and those haven’t been so hot lately, in any
event.
What does this mean to the team and its long-suffering
fans?
Well, it might help explain why the Mariners continue to
avoid pricey free agents in favor of the longer, slower rebuild.
Unlike the Angels, who keep spending and rebuiding on-the-fly with
youth like Mike Trout, Mark Trumbo, Peter Bourjos and
others.
In the longer run, the value of renewed TV rights might
provide the cash windfall this current owner group seems willing to
wait for. Maybe it eventually lets the team offer a contract
extension to Felix Hernandez by the 2014 season. Or, maybe a new
owner willing to pay such a large amount for the team will secure
an ownership stake in any new TV deal and use the cash influx from
that to re-invest in the team.
Whatever the result, don’t let anyone convince you of the
myth that the Mariners are a “small market” team and poor. You
don’t make your money owning sports teams on a year-by-year basis.
You make it when you cash out. If they want to, the M’s owners are
poised to cash-out big and can sell when they want to.
Remember, Larson tried to sell a 10 percent stake in the
team three years ago. The only reason he didn’t was because he
didn’t like the valuation of his shares and chose not to sell. He’s
free to go ahead and sell right now if he wants to and should get a
much better price.
It won’t change anything regarding the team this season. But
better to be informed about what’s really going on when somebody
tells you about rebuilding “the right way” and that the Mariners
have no choice but to maintain the status quo.
There is always a choice. This is the one they’ve chosen.
And not merely for on-field reasons.
http://seattletimes.nwsource.com/html/marinersblog/2018525127_pending_sale_of_padres_could_d.html
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